State GST Officers May Exercise Section 129 Powers in Inter-State Transactions Without Separate Notification – Comment on Shree Maa Trading Company & Ors. v. State of U.P. & Ors. (2025 AHC 143407)

1. Introduction

The Allahabad High Court’s decision in Shree Maa Trading Company and 2 Others v. State of U.P. and 3 Others (Writ Tax Nos. 3171 & 3172 of 2025, decided 21 August 2025) resolves a frequently litigated question under India’s Goods and Services Tax (GST) regime: Are State GST officers competent to detain, seize and impose penalty on inter-State consignments without an express Central/IGST notification?

The petitioners—Delhi based traders whose goods were bound for Raipur—challenged (i) a detention and penalty order issued by the State Mobile Squad at Jhansi under Section 129 of the UPGST Act, and (ii) the appellate rejection thereof. Their principal grounds were:

• That Section 4 of the Integrated GST Act, 2017 (IGST Act) requires a specific Centre-issued notification to authorise State officers for IGST purposes; in its absence, the entire proceeding lacked jurisdiction.
• That the statutory timeline under Rule 138C and allied “MOV” forms had been breached.
• That the petitioners, as owners, should have been proceeded against under Section 129(1)(a) (applicable where owner’s presence is established) rather than Section 129(1)(b).

The State defended its action, relying on the plain text of Section 4 IGST and Section 6 CGST, internal State circulars, and High Court precedents from Madhya Pradesh and Punjab & Haryana.

2. Summary of the Judgment

Justice Piyush Agrawal dismissed both writ petitions, upholding the impugned orders. The Court held:

1. Jurisdiction of State Officers: Section 4 of the IGST Act ipso facto authorises officers appointed under a State GST Act to act as “proper officers” for IGST purposes. A separate notification is only needed if the Government wishes to carve out exceptions or impose additional conditions. Hence, Jhansi officers had unquestionable jurisdiction.
2. Timeliness: The MOV-01 (detention) and GST DRC-01 (show-cause) were issued well within the seven-day window envisaged by Section 129(3), distinguishing the Madras High Court’s ruling in D.K. Enterprises.
3. Owner v. Transporter: Because no valid documents accompanied the consignment at the interception point, Circular No. 76/50/2018 mandates treating the petitioner as “non-owner” for Section 129 purposes; thus penalty under Section 129(1)(b) (tax+penalty equal to 50 % of value) was appropriate.
4. Factual Findings Unassailed: Revenue’s conclusion that the underlying invoices and returns of seller/purchaser were fictitious went unchallenged in the writ petition, foreclosing interference under Article 226.

3. Analysis

3.1 Precedents Cited

1. Advantage India Logistics Pvt. Ltd. v. Union of India (MP HC, 2018) – First High Court to read Section 4 IGST as self-executing. Allahabad High Court adopted this reasoning verbatim (para 18).
2. Bright Road Logistics v. State of Haryana (P&H HC, 2023) – Confirmed that State officers, aided by a State assignment order, may invoke Sections 129 & 130 IGST. Relied on to bolster the jurisdictional argument (para 19).
3. D.K. Enterprises v. Assistant Deputy Commissioner (Madras HC, 2022) – Held that a delay of more than 24 hours between detention and notice vitiates proceedings. Distinguished because the present notice was served within 7 days (para 9).
4. Sunaiba Industries v. State of U.P. (Allahabad HC, 2018) & various interim orders – Cited by petitioners; Court refused to treat interim directions as precedents, invoking Supreme Court dictum in State of Assam v. Barak Upatyaka D.U. Karmachari Sanstha, AIR 2009 SC 2249 (para 24).

3.2 Legal Reasoning

1. Textual Interpretation of Section 4 IGST: The Court emphasised the opening words “Without prejudice to the provisions of this Act” and the phrase “are authorised”, concluding that authorisation is automatic upon appointment under State GST. The proviso (“subject to such exceptions and conditions as the Government…may specify”) merely empowers further limitation by notification; absence of such limitation does not erase the default authorisation (paras 15-17).

2. Harmonious Reading with Section 6 CGST & Rule 20 CGST Rules: Section 6 allows cross-empowerment between Centre and States; Rule 20 recognises State officers for IGST enforcement. These provisions cumulatively leave no vacuum in authority.

3. Administrative Circulars: State circulars dated 01-07-2017 & 04-08-2020 delegate Section 129 functions to Mobile Squad officers; Circular 76/50/2018 clarifies “owner” determination. The Court deployed these to justify invoking Section 129(1)(b) instead of (a).

4. Laches & Procedural Compliance: Establishing that MOV-01 (27-05-2025) → MOV-04/MOV-06 (01-06-2025) → DRC-01 (03-06-2025) fits the statutorily permissible sequence curtailed the petitioner’s procedural challenge.

5. Unchallenged Findings of Fact: Q uestions regarding genuineness of invoices and returns are factual and were never specifically pleaded or rebutted; Article 226 review is therefore barred (paras 11, 25-29).

3.3 Impact of the Judgment

• Clarity on Cross-Empowerment: The ruling cements that Section 4 IGST is self-executing across Uttar Pradesh (and by persuasive value, other States), relieving authorities from issuing redundant notifications each time Section 129 is invoked on inter-State consignments.
• Reduced Litigation: Numerous writs questioning State jurisdiction in IGST matters (particularly Mobile Squad detentions on national highways) are likely to abate or be dismissed in limine.
• Compliance Incentive: Traders can no longer rely on technical jurisdictional objections when documentation is missing or suspect; emphasis shifts to substantive compliance (valid e-way bill, invoice, GST returns).
• Preservation of Revenue: By validating State officers’ authority, the ruling safeguards tax revenue and prevents leakage via jurisdictional loopholes.

4. Complex Concepts Simplified

• Proper Officer: Under GST, a “proper officer” is any officer legally empowered to perform a specific function (inspection, assessment, etc.). Section 4 IGST deems State GST officers as proper officers for IGST, unless the Centre restricts them.
• Section 129 Detention: Allows temporary detention/seizure of goods in transit for suspected tax evasion. Release requires payment of tax + penalty. Sub-clause (a) applies where owner is identifiable; (b) applies where owner is not.
• MOV & DRC Forms: Internal GST enforcement forms—MOV-01 (detention order), MOV-04 (physical verification report), MOV-06 (order of tax & penalty), DRC-01 (statutory show-cause notice).
• E-Way Bill: Electronic permit required for movement of goods over ₹50,000. Absence typically triggers Section 129 proceedings.

5. Conclusion

The Allahabad High Court’s pronouncement in Shree Maa Trading establishes a robust precedent that State GST officers, by virtue of Section 4 IGST and allied provisions, may lawfully exercise detention and penalty powers over inter-State consignments without awaiting a distinct Central notification. The decision narrows avenues for procedural challenges, accentuates the necessity of carrying valid documents, and brings much-needed uniformity to GST enforcement. Its persuasive authority will likely influence other High Courts and fortify the cooperative federal framework envisaged under the GST regime.